Héctor PalominoDirector of StudiesLabour Relations

SSPTyEL

RIALQuebec City

24/25 February 2009

Impact of the Global Impact of the Global

Crisis on the Argentine Crisis on the Argentine

Labour MarketLabour Market

I. Recent evolution of the economy and employment

in Argentina

• GDP GROWTH RATE OVER 2003–08: ANNUAL AVERAGE OF 8.6%

• URBAN EMPLOYMENT GROWTH RATE OVER 2003–08: 25%

• FALL IN THE OPEN UNEMPLOYMENT RATE: FROM 20% OF THE EAP IN Q1/2003 TO 7.3% IN Q4/2008

• NEW EMPLOYMENT REGIME: RISING NUMBER OF JOBS REGISTERED WITH SOCIAL SECURITY, AND REDUCTION OF UNREGISTERED EMPLOYMENT (POSITIVE SUBSTITUTION)

• EMPLOYMENT AT THE HEART OF PUBLIC POLICIES

Argentina: GDP evolution 1996–2007

0

50

100

150

200

250

300

350

400

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

ISI MODEL CRISIS NEOLIBERAL MODEL CRISIS

HIPER TEQUILA

END OFCONVERTIBILITY

Evolution of urban employment 2003–08

95

100

105

110

115

120

125

130

1°Trim03

2°Trim03

3°Trim03

4°Trim03

1°Trim04

2°Trim04

3°Trim04

4°Trim04

1°Trim05

2°Trim05

3°Trim05

4°Trim05

1°Trim06

2°Trim06

3°Trim06

4°Trim06

1°trim07

2°trim07

3°trim07

4°trim07

1°trim08

2°trim08

3°trim08

4°trim08

% Change Q1/ 03 – Q4/ 08

= + 25%

UNEMPLOYMENT AND UNDEREMPLOYMENT

2003–08

17.3

13.6

11.6

10.2

8.57.9

0

2

4

6

8

10

12

14

16

18

20

2003 2004 2005 2006 2007 2008

year

UNEMPLOYEDUNDEREMPLOYED

Evolution of registered Evolution of registered employment employment

January 2002 – December 2008January 2002 – December 2008

135

100

90

100

110

120

130

140

Ene-

02

Abr-0

2

Jul-0

2

Oct-0

2

Ene-

03

Abr-0

3

Jul-0

3

Oct-0

3

Ene-

04

Abr-0

4

Jul-0

4

Oct-0

4

Ene-

05

Abr-0

5

Jul-0

5

Oct-0

5

Ene-

06

Abr-0

6

Jul-0

6

Oct-0

6

Ene-

07

Abr-0

7

Jul-0

7

Oct-0

7

Ene-

08

Abr-0

8

Jul-0

8

Oct-0

8

Change Jan 02 – Dec 08

= +35%

Source: SSPTyEL – DGEyEL, based on EIL (MTEySS).

Evolution of the unregistered employment rate, 2003–08

Q1/2003 – Q4/2004

37,8

36,3

49,7

32,0

34,0

36,0

38,0

40,0

42,0

44,0

46,0

48,0

50,0

52,0

1° Tr

im 0

3

2° Tr

im 0

3

3° Tr

im 0

3

4° Tr

im 0

3

1° Tr

im 0

4

2° Tr

im 0

4

3° Tr

im 0

4

4° Tr

im 0

4

1° Tr

im 0

5

2° Tr

im 0

5

3° Tr

im 0

5

4° Tr

im 0

5

1° Tr

im 0

6

2° Tr

im 0

6

3° Tr

im 0

6

4° Tr

im 0

6

1° tri

m 0

7

2° tri

m 0

7

3° tri

m 0

7

4° tri

m 0

7

1° tri

m 0

8

2° tri

m 0

8

3° tri

m 0

8

4° tri

m 0

8

Source : SSPTyEL – DGEyEL , based on data from EPH, INDEC,

II. COLLECTIVE BARGAININGWAGES AND DISTRIBUTION

2003–08

• STRENGTHENING THE LABOUR RELATIONS SYSTEM: INCREASE IN COLLECTIVE BARGAINING AND ITS COVERAGE

• IMPROVED WAGES, AND CONVERGENCE OF CONTRACTED WAGES WITH ACTUAL WAGES

• GRADUAL IMPROVEMENT IN THE PARTICIPATION OF WAGES IN INCOME DISTRIBUTION

Evolution of collective bargaining 1991–2007

0

200

400

600

800

1000

1200

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Co

llec

tive

Co

ntr

acts

an

d A

gre

emen

ts

Company

Sector

INCREASE IN THE COVERAGE OF COLLECTIVE BARGAINING

2000

2500

3000

3500

4000

4500

5000

5500

6000

6500

Jan

02

Ma

r 0

2

Ma

y 0

2

Jul 0

2

Se

p 0

2

No

v 0

2

Jan

03

Ma

r 0

3

Ma

y 0

3

Jul 0

3

Se

p 0

3

No

v 0

3

Jan

04

Ma

r 0

4

Ma

y 0

4

Jul 0

4

Se

p 0

4

No

v 0

4

Jan

05

Ma

r 0

5

Ma

y 0

5

Jul 0

5

Se

p 0

5

No

v 0

5

Jan

06

Ma

r 0

6

Ma

y 0

6

Jul 0

6

Se

p 0

6

No

v 0

6

Jan

07

Ma

r 0

7

Ma

y 0

7

Jul 0

7

Se

p 0

7

No

v 0

7

Jan

08

Ma

r 0

8

No

. o

f jo

bs

(000

s)

80%

81%

81%

82%

82%

83%

83%

84%

84%

85%

85%

86%

Co

vera

ge

of

coll

ecti

ve b

arg

ain

ing

(%

)

Registered employment:Total PrivateRegistered employment,:Under Collective Contract Registered employment,:Coverage (%)

Convergence between contracted wages and actual wages, 2001–07

$ 400

$ 600

$ 800

$ 1,000

$ 1,200

$ 1,400

$ 1,600

$ 1,800

$ 2,000

$ 2,200

Jan

01

Apr

01

Jul 0

1

Oct

01

Jan

02

Apr

02

Jul 0

2

Oct

02

Jan

03

Apr

03

Jul 0

3

Oct

03

Jan

04

Apr

04

Jul 0

4

Oct

04

Jan

05

Apr

05

Jul 0

5

Oct

05

Jan

06

Apr

06

Jul 0

6

Oct

06

Jan

07

Apr

07

Jul 0

7

Oct

07

Wag

e ($

)

40%

50%

60%

70%

80%

90%

100%

Rat

io o

f co

ntr

acte

d w

age

to a

ctu

al w

age

(%)

Contracted wage (22 CCT)

Actual wage

Ratio of contracted wage to actualwage (%)

PARTICIPATION OF WAGES IN INCOME, 1993–2008

44.7%

41.2%40.0%

37.5%37.1%

38.3%

40.7% 40.5%

42.1%

34.6%34.3%

36.1%

38.6%

41.3%

42.9%43.6%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Share of Payment for Salaried Work in Gross Added Value

III. CRISIS IMPACT: 4TH QUARTER 2008

• FALL IN REGISTERED EMPLOYMENT, FOR THE FIRST TIME SINCE 2003

• FALL IN WORKER HIRING• FALL IN NUMBER OF WORKERS DECIDING TO LEAVE THEIR JOBS

• SECTORAL IMPACT: FALL IN EMPLOYMENT IN ALL SECTORS EXCEPT SERVICES (+) AND TRANSPORTATION, STORAGE, AND COMMUNICATIONS (=)

• GREATEST NEGATIVE IMPACT ON LEAST QUALIFIED WORKERS • IMPACT ON ALL BRANCHES OF INDUSTRY, PARTICULARLY THE

AUTOMOBILE SECTOR • EXCEPT FOR BANKS AND HOTELS, GREATEST IMPACT ON DOMESTIC

COMPANIES

• IN THE SHORT TERM: SUBSTITUTION OF FORMAL EMPLOYMENT WITH INFORMAL EMPLOYMENT

Monthly change in registered Monthly change in registered employment, employment,

total companies surveyedtotal companies surveyed

-0,2%

-0,4%

-0,6%

-0,8%

-0,6%

-0,4%

-0,2%

0,0%

0,2%

0,4%

0,6%

0,8%

1,0%

Ene-07

Feb-07

Mar-07

Abr-07

May-07

Jun-07

Jul-07

Ago-07

Sep-07

Oct-07

Nov-07

Dic-07

Ene-08

Feb-08

Mar-08

Abr-08

May-08

Jun-08

Jul-08

Ago-08

Sep-08

Oct-08

Nov-08

Dic-08

Fuente: SSPTyEL – DGEyEL, en base a EIL (MTEySS).

Monthly change (%) in registered employment, country total.

0,0

-0,6

-1,3

-0,2

-1,1

-0,6

-1,5

-1,2

-0,9

-0,6

-0,3

0

0,3

Sep-08 Oct-08 Nov-08 Dic-08

Total w/ seasonal correction

Source : SSPTyEL – DGEyEL , based Mi Simplificación program, provided by the Division of Labour Regulations

Evolution in registered employment Evolution in registered employment entry and exit rates entry and exit rates

1,5

2,0

2,5

3,0

3,5

4,0

I-07 II-07 III-07 IV-07 I-08 II-08 III-08 IV-08

Entry Rate Exit Rate

Source: SSPTyEL – DGEyEL, en base a EIL (MTEySS).

Change (%) in registered employment terminations

Reason for termination of employmentChangeQ4/08 /

Q4/07Changes in demand 113,5%Opening new product / business lines 3,4%Seasonal closures 322,9%New machinery -54,1%Reorganization of productive process 5,5%Organizational changes in company management 71,3%Subcontracting with another company -66,6%End of project or specific job 3,1%Disciplinary reasons 18,3%Suitable / Nonsuitable job skills -6,3%End of replacement -13,5%Move to another area 214,9%Worker’s decision -12,1%Other -59,9%Total -2,5%

Source: SSPTyEL - DGEyEL, based on EIL (MTEySS).

Total companies. Q4/2007 – Q4/2008

Evolution in private employment by activity sector

% change: Q3/2008 – Q4/2008

-0,4%

-0,3%

-4,9%

-1,3%

0,0%

-0,1%

0,6%

-6,0% -5,0% -4,0% -3,0% -2,0% -1,0% 0,0% 1,0%

Manufacturing industry

Electricity, gas, water

Construction

Retail, restaurantshotels

Transport, storage, communications

Corporate & financial services

Community, social, personal services

Source : SSPTyEL – DGEyEL , based on EIL (MTEySS ).

Evolution in private employment by job qualification

% change: Q3/2008 – Q4/2008

-0,6%

0,1%

0,2%

-0,9%

-1,1%

-1,2% -1,0% -0,8% -0,6% -0,4% -0,2% 0,0% 0,2% 0,4%

Total

Professional

Technical

Operational Qualification

Unqualified

Source: SSPTyEL – DGEyEL , based on EIL (MTEySS ).

Evolution in private employment by company size

% change: Q3/2008 – Q4/2008

-0,6%

-0,6%

-0,9%

-0,2%

-1,0% -0,9% -0,8% -0,7% -0,6% -0,5% -0,4% -0,3% -0,2% -0,1% 0,0%

Total

10 to 49 employees

50 to 199 employees

200 employees and more

Source : SSPTyEL – DGEyEL , based on EIL (MTEySS ).

Monthly change (%) in industrial employment

Exporting and non-exporting companiesDecember 2008

1,0%

-0,8%

-1,1%

-0,6%

-1,0%

-1,0%

-2,5%

-0,6%

-0,6%

-1,5%

-1,5%

-0,9%

-2,3%

-1,9%

-1,5%

-1,3%

-3,0% -2,5% -2,0% -1,5% -1,0% -0,5% 0,0% 0,5% 1,0% 1,5%

Foodstuffs

Textiles, leather, footwear

Paper, wood, furniture

Petrochemicals

Non-metallic minerals

Metallurgy

Automobiles

All industry

non-exporting

exporting

Source : SSPTyEL – DGEyEL , Based on the Mi Simplificación program provided by the Labour Regulations Division

Monthly change (%) in industrial employment

7,0%

-4,2%

3,9%

-0,7%

0,1%

1,2%

-0,1%

1,6%

-0,9%

-3,6%

-1,3%

0,2%

-0,2%

-1,4%

-3,3%

-1,7%

-10,0% -8,0% -6,0% -4,0% -2,0% 0,0% 2,0% 4,0% 6,0% 8,0%

BUSINESS ACTIVITIES

FINANCIALINTERMEDIATION

TRANSPORT ANDCOMMUNICATIONS

HOTELS & RESTAURANTS

RETAIL

MANUFACTURINGINDUSTRY

MINES AND QUARRIES

TOTAL

National and multinational companies December 2008

National

Multinational

Source : SSPTyEL – DGEyEL , based on the Mi Simplificación program provided by the Labour Regulations Division

Change in the economically active population

Q3/2008 – Q4/2008

-4,9%

2,2%

0,6%

7,2%

-0,4%

-6,0% -4,0% -2,0% 0,0% 2,0% 4,0% 6,0% 8,0%

Unemployed

Employed

Waged, registered

Waged, notregistered

Unwaged

Source : SSPTyEL – DGEyEL , based on data from EPH, INDEC, .

IV. (A) INTERVENTION BY THE STATE AND PRODUCTIVE AGENTS TO

ADDRESS THE CRISIS

DIRECT INTERVENTIONS BY THE MTESS:. CRISIS PREVENTIVE PROCEDURES (PPC) INTENDED TO PROTECT CONTRACTED

EMPLOYMENT (HALTS IN PRODUCTION, ADVANCES ON VACATIONS, REDUCED WORKING DAYS)

. ASSISTANCE FOR COMPANIES THROUGH PRODUCTIVE RECONVERSION PROGRAMS (% TOTAL WAGES)

PUBLIC WORKS PROGRAM TO GENERATE DIRECT EMPLOYMENT AND OFFSET REDUCED PRIVATE INVESTMENT

GOVERNMENT LOANS AND TAX BREAKS FOR SMEs AND AFFECTED SECTORS (AGRICULTURAL MACHINERY) PROVIDED THEY MAINTAIN EMPLOYMENT LEVELS AND REGULARIZE THEIR WORKER CONTRACTS

LOW-INTEREST LOAN PROGRAMS TO SUPPORT APPLIANCE AND AUTOMOBILE PURCHASES

INCREASED SPENDING ON SUBSIDIES FOR LOW-INCOME WORKERS (FAMILIES PLAN, BREADWINNERS PLAN)

IV. (B) INTERVENTION BY THE STATE AND PRODUCTIVE AGENTS TO

ADDRESS THE CRISIS

CLAUSES INCORPORATED INTO COLLECTIVE CONTRACTS• Creation of joint committees to lessen impact on employment.• Information procedure for trade unions regarding adjustment

measures.• Introduction of hourly payment systems. • Leaves of absence with a maximum number of hours (or days)

per year.• Halts in production decided on by companies in agreement with

trade unions in light of economic conditions. CREATION OF AN EMPLOYMENT OBSERVATORY WITHIN THE

TRIPARTITE EMPLOYMENT, PRODUCTIVITY, AND MINIMUM-WAGE COUNCIL

EXAMPLE: JOINT COMMITTEE

• SMATA & Delphi Packard– Joint committee for consultation and prevention:– The Committee is the highest forum for dialogue

between the company and union and comprises: two company representatives, two union representatives.

– The Committee has the following oversight functions: employment levels; general economic factors that could affect employment levels; and evolution of labour relations.

CRISIS PREVENTIVE PROCEDURE

• Instrument created in 1991 by the Employment Law.• Prior to giving notice of dismissals, suspensions, and/or changes

in the working day, companies must provide a grounded justification for the procedure.

• Law No. 24,013, Art. 99: “In the presentation, the applicant shall duly ground his request, providing all the evidence he deems appropriate.”

• In addition, applicants shall present financial statements for the past three years, signed by a public accountant and certified by the Professional Council.

• Finally, companies with more than 500 workers must present their social balance sheets.

Example: Union information procedure

• SMATA & GENERAL MOTORS

– In the event of extraordinary event not caused by the employer that leads to a prolonged reduction or stoppage in work, GMA will not suspend or dismiss workers before exhausting the mechanisms provided for in Arts. 9 and 15 of the collective contract.

– Art. 15: An Evaluation and Follow-up Committee shall be established, comprising three representatives of each party. It shall: Evaluate channels for sharing information and mutual consultation; analyze situations that could affect employment levels; and study ways to mitigate their effects.

Example: Hourly pay system

• SMATA & GENERAL MOTORS – In order to protect employment at times of

economic fluctuations, the parties agree that the employer shall be obliged to guarantee payment of the monthly wage stipulated in Art. 40 and Annex A of the collective contract, and the employee shall be obliged to return the corresponding debited hours, in accordance with the established terms and conditions. In such situations, the Company may offset any reductions in hours paid by longer working days, using an hour credit and debit system, provided that the current provisions governing the length of the working day and rest periods are respected.

Example of production halts with union agreement

• SMATA & DaimlerChrysler– At times of crisis, the company may suspend

workers in accordance with production and organizational needs, by agreeing on with the trade union the economic conditions that are to be observed during the duration, pursuant to the terms of Article 223-bis of the Labour Contract Law.

Effectiveness of intervention: Workers affected by measures affecting

employment, by measure status

October 2008 / January 2009

12.681; 52%

11.529; 48%

Finalized Under negotiation

Source : SSPTyEL – DGEyEL , based on the National Federal Relations Division (Labour Secretariat)

Effectiveness of intervention: Workers affected by measures affecting

employment, by measure type

October 2008 / January 2009

30,3%

37,1%

0,5%

11,4%

20,3%0,4%

Dismissed Suspension Voluntarily retired Advance on vacation Reduced working day Other

Source: SSPTyEL – DGEyEL, based on the National Division of Federal Relations (Secretariat of Labour)(

V. 2009 Scenarios (a)

Annual 2008 Scenario I Scenario II Scenario III

Annual GDP growth 6,7% -1,0% 0,0% 1,5%Labour elasticity of product 0,2 0,5 - 0,47 Share of wages in product(Relative macroeconomic cost of labour)

43,6% 43,6% 43,6% 43,6%

Population 1%Activity rate (Q4/2008) 46%Employment rate (Q4/2008) 42,6% 42,0% 42,2% 42,5%Unemployment rate (Q4/2008) 7,3% 8,7% 8,2% 7,6%Change in unemployment rate 18,9% 12,6% 3,8%

Growth in employmentTotal employment 1,34% -0,5% 0% 0,70%

Wages

General wage level (1) 22,4% 11,5% 11,9% 12,5%

Prices

IPI (3) 19,8% 11,9% 11,9% 11,9%

Real wages (deflated by IPI)

Change in real wages (IPI) -0,27% 0,09% 0,65%

(1) INDEC earnings index(2) Wage index / IPI (REM projection)(3) REM of the BCRA

2009

Constant growth

Constant

V. 2009 SCENARIOS (b)

Sharp deceleration of economic growth Deceleration in job creation Political and social consequence: Increased budget

squabbles in a zero-sum game In the short term:

– formal jobs replacing informal jobs instead of unemployment (good jobs for bad jobs)

– public employment offsetting the drop in formal private employment

• In the medium term: test of the strength of the new employment regime

VI. CONCLUSIONS ARGENTINA APPEARS BETTER PREPARED TO TACKLE THE CURRENT

CRISIS THAN IT WAS IN 2001 PROMPT STATE INTERVENTION REDUCED DISMISSALS BY 50%,

PARTICULARLY IN LARGE COMPANIES: LEARNING EFFECT PLAYERS WILL TURN TO THE STATE IN SEARCH OF A “PROTECTIVE

UMBRELLA” TO WARD OFF THE EFFECTS OF THE EXTERNAL CRISIS DOMESTIC MARKET GROWTH IS EXPECTED TO STRENGTHEN THROUGH

GRADUAL IMPROVEMENTS IN EXCHANGE RATE, THUS PRESERVING MACROECONOMIC STABILITY AND THE CONTINUITY OF THE REINDUSTRIALIZATION PROCESS

REGIONAL PRODUCTIVE AGREEMENTS ARE EXPECTED TO BE STRENGTHENED, PARTICULARLY WITH BRAZIL AND MERCOSUR

THE CRISIS WILL ENCOURAGE EFFORTS TO IDENTIFY A NEW AGENDA FOR ECONOMIC DEVELOPMENT

TO DATE THE CRISIS HAS ENCOURAGED THE CREATION OF NEW SOURCES OF INFORMATION AND THE INTEGRATION OF EXISTING SOURCES

Anti-crisis PoliciesPolíticas SectorialesApoyo créditos y financiamiento sectorial con-dicionado a la protección del empleo, entre otros:• Automotriz• Electrodomésticos• Maquinaria agrícola• Financiamiento PyMEs

Políticas directas del MTESS• Procedimiento Preventivo de

Crisis (PPC)• Subisidio directo condiciona-

do para pagar parte del salario a trabajadores en empresas afectadas

• Negociación directa

Políticas anticrisis“el empleo en el centro”

Políticas Sociales (indirecta) • Jubilados (monto fijo)• Planes Sociales: aumento

transferencia directa por hijo• Estimulo para creación de

nuevas cooperativas • Aumento de asignaciones

del Plan Alimentario Nacional

Política Macro• Fuerte estimulo a la Inversión pública en infraestructura/ viviendas/escuelas• Moratoria previsional condicio-nada a regularización y protección del empleo• Prefinanciación de exporta-ciones y capital de trabajo

Sectorial Policies

Credit support and sectorial financing conditioned to the protectection of the employment, among others:

•Domestic appliances

•Self propelling

•Agricultural machinery

•Financement of small and medium enterprises

Macro Policy

•Strong encouragement to public investment in houses, schools and infrastructure

•Provisory moratory conditioned to regularization and protection of employment

•Pre-financiation of exportations and labour capital.

Direct Policy of the Ministry

•Preventive procedure for crisis (PPC)

•Direct conditioned subsidy to pay a part of the salary of workers in affected enterprises

•Direct negociation

Social Policies (indirect)

•Jubilees (fixed amount)

•Social plans: increase of direct transfer for child

•Increase of assignations that correspond to the Alimentary National Plan (Plan Nacional Alimentario)

Anti-crisis Policies

“employment is the center”